Grexit

[tupac chopra]

No discussion here about the fast approaching exit of Greece from the EU.
Does anyone have any thoughts?
I've been assured by those who know more than me that the relatively recent Long Term Refinancing has "firewalled" others from any downside, but there seems to me to be a real risk of a loss of confidence spreading

 

[Togo]

I think that Greece exiting the euro would be very very dangerous - for the Euro. The fundamentals of the Greek economy aren't that bad compared to Portugal, with Spain and Italy not that far behind. If the greeks go, then the negative speculation and market sentiment will just transfer to another target.

 

[funinspace]

Beyond what I see as a fatally flawed Euro system, Greece will remain in great difficulties for decades if they don’t leave the Euro. And the previous “fix” was hardly any fix at all. It was more of a kicking the financial can down the alley. Well, it appears that they might have finally run into the end of the alley. Below is probably as good of summary as any of the mess. Yeah, if they leave the Euro there is a good chance that they will still mess it up. But at least it will be their mess to fix. Either way, much more debt really needs to be written off, as foolish lenders have earned a good burning...
http://www.oftwominds.com/blogfeb15/death-star-debt1-15.html

There are three fundamental points that need to be emphasized, mostly because they've been lost in handwringing, fearmongering and the ceaseless chatter of propaganda shills.

1. Impaired debt and defaults result from imprudent underwriting and lender incompetence/greed. Since when did it become accepted policy to reward imprudent lending, incompetence and greed?

Classical Capitalism is very clear on what should happen to lenders who ignored risk management; they get destroyed. As imprudently issued loans default, the losses pile up and the lender become insolvent. At that point, Capitalism kicks in and the management is fired, the stock goes to zero, the lender's assets are auctioned off and the creditors are issued whatever remains after wages, taxes, accounts payable, etc. are paid.

There's nothing complicated about it: Capitalism requires the discipline of losses being taken by those responsible, the firing of incompetents and the destruction of imprudent lenders.

Yet somehow the dominant narrative has reversed this essential core of Capitalism into blaming the borrower for the losses.
<snip>
Look, if someone offers to loan me a billion dollars with no collateral and no assessment of the risks that I might not be able to pay the interest or principal, then who's the fool? The idiot who wants to give me $1 billion without any risk assessment, or the borrower who takes the "free money" being offered?
<snip>
2. Greece will not be wiped out by leaving the euro currency--it will be freed to rebuilt itself with prudent fiscal management and policies that reward investment and penalize risky borrowing, speculation and corruption.

Here's the thing about Greece issuing its own fiat currency--it will force fiscal discipline in a way that the euro did not and could not.
<snip>

3. The hundreds of billions of euros in so-called bailouts did not help Greece--all they did was bail out imprudent lenders and Euroland Elites. Virtually none of these vast sums helped the Greek nation or its people; what little did stay in Greece flowed to the kleptocrats that continued to rule Greece.

Sure the EUrocrats are concerned about a Grexit, because as just said, Spain, Italy, and Portugal are only a little better off. And from what I can tell, the anti-establishment political forces are growing at least in both Italy and Spain. Maybe the EU would be better off with a Southern Euro and a Northern Euro, but it is probably too late for corrections of such a scale. Kind of reminds me of penguins all nudging towards the edge of the ice sheet, so they can accidently dump one of their kind over and find out if there actually is a sea lion down under….

 

[Jimmy Higgins]

Greece can exit all they want. That won't help their debt interest rates. In fact, it'll make it worse.

The rest of the Euro would suffer from the consequences of Italians, Spanish debt not appearing so secure anymore.

 

[dismal]

I'm not sure I get the logic that Spain, Italy and Portugal will fall like dominos if Greece leaves.

They all have their own facts and circumstances.

Is the logic based on the assumption Greece will be awesome without the Euro and the other PIGS will want that awesomeness too?

 

[ksen]

I think the argument isn't that Greece will be awesome but that Greece will have a better chance of fixing itself if it was out of the Euro and if Greece leaves the Euro and fixes its financial problem then other Euro countries in similar situations may take the same step Greece did and leave the Euro.

 

[dismal]

I think the argument isn't that Greece will be awesome but that Greece will have a better chance of fixing itself if it was out of the Euro and if Greece leaves the Euro and fixes its financial problem then other Euro countries in similar situations may take the same step Greece did and leave the Euro.

And Italy, Portugal and Spain will also be better off without the Euro?

If so, how does keeping Greece in change that?

And, moreover, why should I be rooting for the Euro if it makes all these countries worse off?

 

[ksen]

I think the argument isn't that Greece will be awesome but that Greece will have a better chance of fixing itself if it was out of the Euro and if Greece leaves the Euro and fixes its financial problem then other Euro countries in similar situations may take the same step Greece did and leave the Euro.

And Italy, Portugal and Spain will also be better off without the Euro?

"Will"? Where did I say any of these countries would definitely be better off? I didn't.

What I did say was that if Greece left the euro and if Greece managed to turn itself around outside of the Euro then countries in similar situations might decide to take a similar path.

If so, how does keeping Greece in change that?

Since I didn't say "will" I don't have an answer to your question because it isn't related to anything I said.

And, moreover, why should I be rooting for the Euro if it makes all these countries worse off?

I don't know, why should you? And who has said that it's the Euro that's definitely the problem?

- - - Updated - - -

eta: and this is why it's hard to have a serious discussion with you because it seems you are too busy trying to play "gotcha" that it's practically impossible to discuss anything with you for any amount of time

 

[funinspace]

I think the argument isn't that Greece will be awesome but that Greece will have a better chance of fixing itself if it was out of the Euro and if Greece leaves the Euro and fixes its financial problem then other Euro countries in similar situations may take the same step Greece did and leave the Euro.

Yet you surged forward and bit the wiggling little worm, not seeming to notice the translucent nylon chord quivering at the surface line

 

[dismal]

And Italy, Portugal and Spain will also be better off without the Euro?

"Will"? Where did I say any of these countries would definitely be better off? I didn't.

What I did say was that if Greece left the euro and if Greece managed to turn itself around outside of the Euro then countries in similar situations might decide to take a similar path.

If so, how does keeping Greece in change that?

Since I didn't say "will" I don't have an answer to your question because it isn't related to anything I said.

And, moreover, why should I be rooting for the Euro if it makes all these countries worse off?

I don't know, why should you? And who has said that it's the Euro that's definitely the problem?

- - - Updated - - -

eta: and this is why it's hard to have a serious discussion with you because it seems you are too busy trying to play "gotcha" that it's practically impossible to discuss anything with you for any amount of time

Those are sincere and legitimate questions. If you can't answer them feel free to say 'I don't know, I don't really get the argument either".

You are under no requirement I am aware of to step up and defend the awesomeness of the Euro and the pivotal importance of Greece being in it.

 

[ksen]

I can't help myself.

I like the back and forth with dismal and am always entertained to see what wild places he'll take the thread to next.

 

[dismal]

I can't help myself.

I like the back and forth with dismal and am always entertained to see what wild places he'll take the thread to next.

Yeah, like maybe the thread will veer into a discussion in which someone comes up with an explanation as to what Greece has to do with Spain, Italy, and Portugal falling like dominos.

Not you of course. You're already on to personal comments.

 

[Jimmy Higgins]

I can't help myself.

I like the back and forth with dismal and am always entertained to see what wild places he'll take the thread to next.

The thing with Greece is the Euro was the hook to begin with. Look at their debt interest rate historically and you can tell where the Euro came, making money much cheaper and accessible. Leaving the Euro zone won't change how hard it will be to pay for their debt.

 

[T.G.G. Moogly]

I can't help myself.

I like the back and forth with dismal and am always entertained to see what wild places he'll take the thread to next.

The thing with Greece is the Euro was the hook to begin with. Look at their debt interest rate historically and you can tell where the Euro came, making money much cheaper and accessible. Leaving the Euro zone won't change how hard it will be to pay for their debt.

Shut up, Jimmy. You're making sense. We prefer the soap opera.

My take is it doesn't matter. Certainly, from a Greek standpoint they are better off making an exit. And they will. This is the endgame.

 

[Horatio Parker]

Some are saying that a Grexit would boost France's RW, antiEU parties enough that they could capture the govt. And France pulling out would doom the EU.

 

[laughing dog]

The thing with Greece is the Euro was the hook to begin with. Look at their debt interest rate historically and you can tell where the Euro came, making money much cheaper and accessible. Leaving the Euro zone won't change how hard it will be to pay for their debt.

Shut up, Jimmy. You're making sense. We prefer the soap opera.

My take is it doesn't matter. Certainly, from a Greek standpoint they are better off making an exit. And they will. This is the endgame.

It is not clear Greece will better off exiting the EU. While they will have control over their own money supply, much of their debt is in Euros. And, they will lose easy access to EU markets.

 

[Jimmy Higgins]

Shut up, Jimmy. You're making sense. We prefer the soap opera.

My take is it doesn't matter. Certainly, from a Greek standpoint they are better off making an exit. And they will. This is the endgame.

It is not clear Greece will better off exiting the EU. While they will have control over their own money supply, much of their debt is in Euros. And, they will lose easy access to EU markets.

The idea of leaving the EU seems whimsical to them, but the newly elected clearly haven't thought this through. They don't like the deals they have now, I'm not certain how they can do better, short of reinstituting their own currency and turning it immediately into toilet paper.

 

[Togo]

Yeah, like maybe the thread will veer into a discussion in which someone comes up with an explanation as to what Greece has to do with Spain, Italy, and Portugal falling like dominos.

Selling down greece, greek debt and greek government institutions, is not just the markets tanking Greece's credit rating, which is the chances of it defaulting on it's loan payments. It's also the markets speculating on whether Greece will stand on it's own or be propped by the EU and the eurozone. If the Eurozone is going to prop up Greece, then ultimately Greece's credit rating doesn't really matter so much, since they're not the ones backing the loan. Similarly if Greece exits, they might as well default on their debt, because they'll be in trouble anyway. So ultimately the market position on Greece is the market position on euro-zone policy. Greece itself is kinda irrelevent.

The reason why the same isn't happening to Portugal, for example, despite the debt problems being similar, is that Greece is worse. If Greece exits, then two things will happen. The first is that all the people who want to bet against the Euro-zone propping up it's members will switch their positions to the next-worst country, probably Portugal. That's billions of dollars that were being invested in lowering the value of Greek debt being moved to the Portugeuese. The second is that, since the Euro-zone didn't prop up Greece, fewer people will be willing to beleive that they would prop up Portugal, and so would be even willing to sell down Portugal. And the third is that, with Greece having defaulted, a default by Portugal is considered more likely. The overall effect is to take the pressure being applied to Greece, increase it, and apply it to Portugal.

If Portugal goes, repeat for Spain. If Spain goes, repeat for Italy. And so on.

 

[Draconis]

The impression I got was that lots of banks in Europe lent Greek banks money. If these greek banks start paying back these loans in toilet paper, they will never get their money back. I understand several Spanish banks are hardly in good shape either, for this and the collapse of the housing boom there.

It's just one of the places in Europe that had a ridiculous housing bubble that hasn't really been popped properly.

 

[Funkytrip]

There's also the problem that if the EU decides Greece doesn't have to pay back their debt (or pay way less), the people in Portugal, Spain and Ireland will also vote for their own Scyriza parties. It will trigger a chain reaction. "If Greece doesn't have to pay back its debt, why do we?"

Damned if we do, damned if we don't.